From the top floor of the Star Hotel, the scene is spectacular - Bethlehem nestles in sun-dappled hills, its church spires set against a clear spring sky.

From the distance, the biblical city looks like a place at peace.

Local residents say Israelis bring destruction everywhere

But sporadic gunfire crackles through deserted streets, along with the occasional burst of tank fire and loudspeaker calls by Israeli soldiers, demanding that the Palestinians holed up inside the Church of the Nativity surrender.

The siege of one of Christianity's most sacred sites is now entering its second week, with neither side backing down.

About 200 Palestinians, many of them armed, are still refusing to leave the Church of the Nativity, where a Palestinian policeman died in a gun-fight early on Monday. His body remains in the church.

The Israeli army says its soldiers have taken up several positions in Manger Square, but it is still refusing to pull back or to allow journalists to reach the area. Warning shots are fired at those who try.

Battle-scarred

Church leaders have called on Israel to "go in peace." But there is no sign of that yet.

The past week has left Bethlehem a battered, battle-scarred city, its people apprehensive about how the stand-off at the Church of the Nativity will end.

I expect Israeli commandos will go in

Local hotel manager

The streets leading to Manger Square are littered with broken glass and spent bullet shells.

Water spews from broken pipes. The windows of the Lutheran Church's new art and craft centre have all been shot out, and cars crushed by Israeli tanks line the road.

Onslaught fears

Even though the Israeli army has repeatedly promised not to storm the Church of the Nativity, many believe it might.

"I hope it'll end peacefully but I'm not sure. Israel must withdraw. Ariel Sharon has made his point - that's enough."

We were afraid at the beginning. But now we've stopped being scared

Bethlehem resident

The Star is the only hotel that has kept its doors open throughout the 18-month intifada.

Now, its only inhabitants are journalists, and the restaurant window bears the bullet-holes of shots fired at a cameraman trying to film from it last week.

A convoy of reporters trying to take a sick colleague to hospital had to turn back when the road in front of them was raked by machine gun fire on Tuesday afternoon.

The BBC team in Bethlehem put on flak jackets and helmets inside our make-shift office after shots were fired just outside the hotel.

Hunt for food

The round-the-clock curfew was lifted briefly on Monday, but is now firmly back in place.

Most residents are cowering in their homes, running short of supplies. The Red Cross says a food truck it managed to bring into Bethlehem on Monday was "besieged" by people.

As we tried to reach Manger Square earlier, we met a small group of women defying the curfew on a desperate but ultimately fruitless hunt for medicines, baby milk and nappies.

Hassan says nothing can stop him from playing outside his house

"We were afraid at the beginning," said 37-year old mother of 10, Ibtisam Zabalani. "But now we've stopped being scared."

She said soldiers who searched her house had left destruction in their wake.

"They broke the fridge, and the windows, and they tipped everything over. They beat the kids, even though they did nothing."

Ibtisam said four of her elder sons were among the hundreds arrested for interrogation, as Israel continued its sweeping detentions.

And she showed me scratch marks on her arms that she accused the soldiers of causing.

The only other person we encountered on the street - aside from fellow journalists - was nine-year-old Hassan Ishaq, who was taking advantage of a lull in the shooting to play football with his sister, just outside the Star Hotel.

"My mum doesn't want me to go outside, but I can't stand it inside anymore," he told us. "I'm a little bit frightened because the Israelis kill people, but it's my right to play."